Fantasy games firm FanDuel acquires eSports business

FanDuel has acquired US eSports platform AlphaDraft for an undisclosed sum, believed to be below the $25m the vendor was expecting.

The deal comes a day after its rival DraftKings announced that it would include competitive video gaming in its betting lineup. By 2017, the number of eSports fans is projected to come close to that of American football.

It was announced after Nigel Eccles, co-founder of FanDuel, told an audience of entrepreneurs and advisers in Edinburgh that it was under no pressure to seek an IPO, though the board would look at it again in two years time.

US analysts have been pushing for a flotation of the fast-growing company which is co-headquartered in Edinburgh and New York.

Speaking after sharing a platform with Skyscanner chief executive Gareth Williams in Edinburgh, Mr Eccles said: “Our investors have been very patient. They have had a great return. We will take a look at whether we need an IPO in 2017.”

Some US investors have urged it to merge with DraftKings whose boss Jason Robins is said to have warmed to the idea. Mr Eccles has resisted going down that route.

FanDuel, valued at $1 billion, is not profitable because it chooses to invest in buying customers and ramping up revenue, said Mr Eccles, chief executive, who launched company with his wife Lesley and three others in 2007.

“We will take another look at what we want to do in January,” he said.

An IPO would represent a huge pay day for early stage investors. Scottish Enterprise which is understood to have put £2 million into the company as an early stage backer could be sitting on a stake now worth about £80m.

Mr Eccles last night declined to comment on recent moves by US Congressman Frank Pallone to have daily fantasy sports declared online gambling which is illegal in the US. He has demanded a hearing in what is believed to be the first direct legal challenge to an industry that has seen explosive growth in recent years.

“Fans are currently allowed to risk money on the performance of an individual player,” Mr Pallone said. “How is that different to wagering money on the outcome of a game?”

FanDuel and DraftKings spend millions of dollars on promoting games which some say is akin to encouraging gambling. The companies say their activities are games of skill and are therefore legal.

During a presentation at Dynamic Earth in Edinburgh tonight Mr Eccles confirmed that FanDuel spends $200 million a year on advertising, making it one of the top five advertisers on US television.

Both he and Mr Williams, whose flight comparison website is also valued at $1bn, spoke favourably about Edinburgh’s technology support network which had given them the springboard to succeed.

The duo were brought together for an inaugural event under the Entrepreneurial Scotland Leaders Exchange programme. An audience of more than 300 members and guests from start-ups, growth firms and professional advisers attended the presentation.

Entrepreneurial Scotland aims to make Scotland the most entrepreneurial society in the world.

Mr Williams urged the government to think big around transport and broadband technology to ensure people were properly connected.